JOHN C. NIVISON, Magistrate Judge.
This matter involves a dispute regarding the future ownership of two parcels of land and the improvements thereon in Georgetown, Maine. Plaintiffs ask the Court to order Defendant, in her capacity as personal representative of the Estate of Elizabeth Hersant, to sell her interest in Lot 38 on Marrtown Road in Georgetown to Plaintiff Margaret Winn and sell her interest in Lot 39 on Marrtown Road to Plaintiff Douglas Kulis. Defendant seeks the equitable partition of Lot 38 and the statutory partition of Lot 39.
The Court conducted a bench trial at which the parties presented the testimony of witnesses, including expert witnesses, and other evidence. Following the trial, the parties filed written argument.
After consideration of the evidence presented at trial, the Court finds the following facts:
In this diversity action, Maine substantive law applies. Alejandro-Ortiz v. Puerto Rico Elec. Power Authority, 756 F.3d 23, 26 (1st Cir. 2014). In Libby v. Lorrain, 430 A.2d 37, 39-40 (Me. 1981), the Maine Law Court explained the law of partition in Maine as follows:
Id. (citations omitted).
Defendant asks the Court to divide Lot 39 physically — to grant her 25% of the property and grant Douglas 75% of the property. The division of Lot 39, however, with its steep, rugged topography and limited means of access, is not practical and would materially impair the parties' interests in the property. Indeed, other than the bald assertion of Defendant's expert, John Wood, that the property was capable of division, the record lacks any evidence that a physical division is feasible or practical. In addition, the record does not include a plan for division or evidence that a physical division of the property in accordance with the parties' interests could be accomplished within the applicable state and local laws and ordinances.
Furthermore, the persuasive evidence established that the value of Lot 39, and thus the parties' interests, would be impaired if a physical division were feasible and ordered. Mr. Charest, Plaintiffs' expert appraiser, and Ms. Furbeck-Owen, Defendant's expert appraiser, agree that while future development of the property in the highest and best use of the Lot 39, the buildable area of the property is limited; the record contains no persuasive evidence that the property consists of more than one buildable lot. A physical division of the property would thus materially injure the rights of the parties insofar as one party would receive a buildable lot and the other would receive a parcel that is not buildable. The party receiving the non-buildable lot would receive less value and would have fewer options for the property's use.
The location of key features would also complicate efforts to divide the property physically. The parcel is oblong, with road access to the south and southwest, water access at the northwest corner, and the flattest areas most likely to support development are in the northeast and the southern portions. The configuration of the property makes it impractical to create two parcels with proportionate road access, water access, and potential for future development. See Williams v. Coombs, 88 Me. 183, 33 A. 1073, 1074 (1895) ("It is the opinion of the court, therefore, that this property could not be divided without greatly impairing its value" and concluding, therefore, that an equitable partition "would be much more beneficial to both parties").
In short, the statutory partition of Lot 39 would materially injure the parties' rights and is otherwise impractical.
All parties seek the equitable partition of Lot 38. Plaintiff Douglas Kulis and, in the alternative if the Court denied her request for the physical partition of Lot 39, Defendant also asks for the equitable partition of Lot 39. The parties, however, disagree as to the value of the lots and thus what would constitute an equitable partition of the properties.
"The trial court's equity power is broad and flexible," and is within the trial court's discretion. Withee v. Garnett, 1998 ME 30, ¶ 4, 705 A.2d 1119, 1120. Maine courts exercising their equitable powers ordinarily partition jointly owned property by ordering the property sold and the proceeds divided, by assigning the property to one party with the requirement that they pay a sum of money to compensate the other, or by some contingent combination of those options. See Hutz v. Alden, 2011 ME 27, ¶¶ 13-14, 12 A.3d 1174, 1178; Whittet v. Whittet, No. RE-11-26, 2013 WL 8114512, at *4 (Me.Super. Sep. 26, 2013). Courts must examine "all . . . relevant equitable considerations" and factors, including but not limited to the length of occupancy, the efforts expended on the property, the expenses and delay of selling to a third-party, and the financial capacities of the parties. Libby, 430 A.2d at 40; Ackerman v. Hojnowski, 2002 ME 147, ¶ 20, 804 A.2d 412, 417-18; Wicks v. Conroy, 2013 ME 84, ¶ 19, 77 A.3d 479, 484.
If the chosen method of equitable partition requires a court to assign a value to the property, "[t]he court is not required to accept an appraiser's valuation . . . and its decision to do so must be based upon a determination of the appraiser's credibility and the weight given that opinion." Hutz, 2011 ME ¶ 14, 12 A.3d at 1178. When there is a disagreement as to value of jointly owned property, "a mere averaging of two appraisals may not be acceptable" but "any estimate that is within the range of expert opinion is valid provided the [judge] reached his [or her] own conclusion through an independent review of the evidence." Shirley v. Shirley, 482 A.2d 845, 849 (Me. 1984); see also Curtis v. Weston, 1997 ME 28, ¶ 2, 690 A.2d 969, 970 ("the court was not compelled to choose either of the appraisals of the property, but properly determined its value within the range of the evidence").
Here, the balance of all the equities favors a partition by assignment, or buy-out, over the other options. A sale of either or both properties would result in a further delay in the resolution of the property's ownership, an increase in administrative costs, and would risk forced divestiture of the family property. See Zachary D. Kuperman, Cutting the Baby in Half: an Economic Critique of Indivisible Resource Partition, 77 Brook. L. Rev. 263, 290-93 (2011) (noting that a significant number of states explicitly or in practice prefer buy-outs, citing Dyer v. Lowell, 30 Me. 217, 219 (1849) ("If the estate was incapable of division, they should have set off the whole to one of the co-tenants") and Wilk v. Wilk, 795 A.2d 1191, 1196 (Vt. 2002) (explaining that "[f]orced sale is disfavored because the Legislature, and the common law that came before, sought to minimize the forced divestiture of family property where avoidable")). In these circumstances, "there [is] much to impel the . . . court to" order a buy-out. Libby, 430 A.2d at 40.
The Court is also convinced that the buy-out should occur through Plaintiffs' purchase of Defendant's interest in both lots. Plaintiffs have strong connections to, lengthy histories with, and recent consistent use of the properties; Plaintiffs also have the financial ability to purchase Defendant's interest. Defendant has not demonstrated that she would make as much use of the properties as Plaintiffs and has not established that she has the financial ability to purchase Plaintiffs' interests.
The parties' expert appraisers differ significantly regarding the value of Lot 39. The difference is primarily based on (a) the sales the appraisers used as comparable sales to establish the value of the property and (b) the significance the appraisers placed on the property's 660 feet of frontage on the Kennebec River.
While both appraisers presented as experienced and qualified to opine on the value of Lot 39, they clearly viewed the property differently. Both determined that the highest and best use of the property was future development. As discussed above, however, for various reasons (e.g., slope of the property, means of access), the buildable area is limited. While Mr. Charest's assessment process and general analysis appear to be sound, his assessment is not entirely reasonable. In addition, the Court is not convinced that Ms. Furbeck-Owen's valuation of the property, based in part on her view that the property was suitable for a personal estate, with multiple structures, is supported by credible evidence of record.
One area of disagreement is the significance of the water frontage. Mr. Charest considered the water frontage to a degree, but primarily considered the property to be water view.
The issue is the appropriate value of the property given the concerns raised about the appraisals of both experts. Here, the range of evidence of value
After reviewing the comparable sales, Mr. Charest assessed the value of Lot 39 at $5,600 per acre.
The parties' appraisers also differed as to the value of Lot 38. The appraisers, however, used four of the same comparable sales in their respective assessments. The range of value for Lot 38 is from Mr. Charest's valuation of $495,000 to Ms. Furbeck-Owen's valuation of $725,000 to $750,000.
Ms. Furbeck-Owen placed greater value on the water frontage as she did not consider the property to be tidal. Ms. Furbeck-Owen's determination that the property was not tidal because a dock could be constructed to permit access to the water in low tide is unpersuasive. The water frontage "flats out" even beyond the current dock. Under the circumstances, Mr. Charest's characterization of the frontage as tidal is more appropriate.
The two appraisers also differ markedly on their assumptions regarding the leases. Ms. Furbeck-Owen did not consider the existence of the two leases to have a significant impact on the value of the property. Defendant, in fact, questions the validity of the leases at their inception in 1964, the validity of the lease extensions in 1997, and the continued survival of the leases after Margaret, Elizabeth, and Orin became owners of the fee interest. Mr. Charest, in contrast, assumed the leases are valid and thus not part of the commonly owned property. He subtracted the two remaining leased lots from the acreage and did not assign any value to the structure Margaret built on the lot leased to her.
Given the circumstantial evidence of the leases, including the existence (if not the continued existence) of writings that would satisfy the statute of frauds and given the parties' historical recognition of the leases, the leases must be considered to some degree in the valuation of the property.
Ms. Furbeck-Owen did not meaningfully account for the impact of the leases. The existence of the leases or, at a minimum, the prospect of legal proceedings regarding the validity of the leases, would undoubtedly adversely impact the value of the property to an ordinary prospective buyer. That is, regardless of the ultimate legal status of the leases, the existence of the leases and the existence of a structure on one of the leased premises would affect the value of the property to a greater degree than Ms. Furbeck-Owen assigned. Furthermore, the value assigned by Ms. Furbeck-Owen to the structure on Margaret's leased parcel ($125,000) does not appear to be reasonable. Based on the photographs and the witnesses' description of the structure, the assigned value of the structure appears high.
In his assessment, Mr. Charest used appropriate comparable sales and made supportable adjustments for differences in acreage, the quality of the structures, and the topography and nature of the waterfront. Mr. Charest's opinion of the value of Lot 38 serves as a useful baseline for the Court. Mr. Charest, however, included too great a discount for the leasehold interests. First, any challenge to the validity of the leasehold interests would present a legitimate issue and a court could conceivably find the leases to be invalid or that the leases merged with the fee interests of Margaret and Orin Winn. In addition, even if valid, the leasehold interests will terminate either upon expiration of the lease terms or the deaths of the lessees. Under the circumstances, to remove the leased property from the amount of acreage considered and not give any value to the property would be unreasonable as a prospective buyer would undoubtedly consider the realistic duration of the leasehold interests.
The two appraisers also disagree as to the propriety of subtracting another acre from the parcel's effective size for wetland or other areas that are less usable. Ms. Furbeck-Owen credibly disputed Mr. Charest's reduction in effective size for this acre, as she testified that many of the comparable properties had similar features.
Consistent with the method Mr. Charest used to adjust the comparable sales with different acreages and building sizes, the Court affords some value for the leased property and the areas that are less usable due to the wetlands issue, and adjusts upward Mr. Charest's assessed value.
Based on the foregoing findings and analysis, the Court enters judgment as follows:
(Trial Tr. at 318.)
According to the doctrine of merger, "[w]henever a greater and a less estate" are both owned at the same time by the same entity, "the less is immediately merged in the greater, and thus annihilated." Nature of Merger Generally, 31 C.J.S. Estates §§ 153 et seq. There is a split of authority concerning the merger rule as applied to a leaseholder who subsequently takes a fee interest in common with others. Compare Clayton v. Clayton, 75 So.3d 649, 654 (Ala. Civ. App. 2011) (a merger occurs when a lone tenant under a lease acquires ownership of the freehold estate as a joint tenant with another because a joint tenant "is considered to own an undivided interest in the whole property"); with Hurley v. A'Hearn, 157 N.E.2d 223, 224 (Mass. 1959) ("the acquisition of an undivided one-half interest by one who held a lease of the premises did not effect a merger" because "[t]here is nothing to indicate that the mother in devising to [the leaseholder] a half interest in the property intended that [the leaseholder] should not continue to hold as lessee under the lease"). Although there is limited authority on point, the Maine Law Court declined to find a merger in the related context of easements when the greater estate was owned jointly by others. See Dority v. Dunning, 78 Me. 381, 6 A. 6, 9 (1886) ("the ownership of the two estates should be co-extensive . . . If one is held in severalty, and the other only as to a fractional part thereof, by the same person, there will be no extinguishment of such easement"). Whether similar reasoning would control under the present facts is uncertain. The Court, however, is not required to decide whether the interests merged in order to resolve all issues among the joint owners with an ordered buy-out of an owner without a leasehold interest.